Some embodiments provide a method for a managed forwarding element (MFE). The method receives a packet from a data compute node for which the MFE performs first-hop processing. The data compute node is associated with multiple tunnel endpoints of the MFE. The method determines a destination tunnel endpoint for the packet. The method uses a load balancing algorithm to select one of the multiple tunnel endpoints of the MFE as a source tunnel endpoint for the packet. The method encapsulates the packet in a tunnel using the source and destination tunnel endpoints.